11. SHARE-BASED COMPENSATION

On April 11, 2014, HC2’s Board of Directors adopted the HC2 Holdings, Inc. 2014 Omnibus Equity Award Plan (the “Omnibus Plan”), which was approved by our stockholders at the annual meeting of stockholders held on June 12, 2014. The Omnibus Plan provides that no further awards will be granted pursuant to HC2’s Management Compensation Plan, as amended (the “Prior Plan”). However, awards that had been previously granted pursuant to the Prior Plan will continue to be subject to and governed by the terms of the Prior Plan. As of March 31, 2015, there were 469,871 shares of HC2 common stock underlying outstanding awards under the Prior Plan.

The Compensation Committee (the “Committee”) of the Board of Directors of HC2 administers HC2’s Omnibus Plan and the Prior Plan and has broad authority to administer, construe and interpret the plans.

The Omnibus Plan provides for the grant of awards of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock based awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. HC2 typically issues new shares of common stock upon the exercise of stock options, as opposed to using treasury shares. The Omnibus Plan authorizes the issuance of up to 5,000,000 shares of HC2 common stock, subject to adjustment as provided in the Omnibus Plan.

The Company follows guidance which addresses the accounting for share-based payment transactions whereby an entity receives employee services in exchange for either equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. The guidance generally requires that such transactions be accounted for using a fair-value based method and share-based compensation expense be recorded, based on the grant date fair value, estimated in accordance with the guidance, for all new and unvested stock awards that are ultimately expected to vest as the requisite service is rendered.

There were 691,205 and 8,521 options granted during the three months ended March 31, 2015 and 2014, respectively. Of the 691,205 options granted during the three months ended March 31, 2015, 169,697 of such options were granted to Philip Falcone, pursuant to anti-dilution provisions of a standalone option agreement entered in connection with Mr. Falcone’s appointment as Chairman, President and Chief Executive Officer of HC2, and not pursuant to the Omnibus Plan. The weighted average fair value at date of grant for options granted during the three months ended March 31, 2015 was $3.16 per option. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions shown as a weighted average for the year:

	Three Months Ended March 31,
	2015		2014
Expected option life		5.25 years		6 years
Risk-free interest rate		1.49 - 1.68%		2.62 - 2.73%
Expected volatility		36.29- 39.58%		37.20%
Dividend yield		0%		0%

Total share-based compensation expense recognized by the Company during the three months ended March 31, 2015 and 2014 was $2.2 million and $0.2 million, respectively. Most of HC2’s stock awards vest ratably during the vesting period. The Company recognizes compensation expense for equity awards, reduced by estimated forfeitures, using the straight-line basis.

Restricted Stock

A summary of HC2’s restricted stock activity during the three months ended March 31, 2015 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested – December 31, 2014		338,702		$	4.26
Granted		1,436,281		$	9.00
Vested		(876,014	)	$	8.99
Forfeitures		—		$	—
Unvested – March 31, 2015		898,969		$	7.23

As of March 31, 2015, the unvested restricted stock represented $5.7 million of compensation expense that is expected to be recognized over the weighted average remaining vesting period of 1.1 years. The number of shares of unvested restricted stock expected to vest is 898,969.

Stock Options

A summary of HC2’s stock option activity during the three months ended March 31, 2015 is as follows:

				Weighted
				Average
	Shares			Exercise Price
Outstanding – December 31, 2014		3,573,141		$	4.27
Granted		691,205		$	8.82
Exercised		—		$	—
Forfeitures		(4,335	)	$	2.79
Outstanding – March 31, 2015		4,260,011		$	5.01
Eligible for exercise		1,576,470		$	5.16

The following table summarizes the intrinsic values and remaining contractual terms of HC2’s stock options (in thousands):

			Weighted
			Average
	Intrinsic		Remaining
	Value		Life in Years
Options outstanding – March 31, 2015	$	26,781		9.4
Options exercisable – March 31, 2015	$	9,649		9.3

During the three months ended March 31, 2015, the intrinsic value of the exercised options was $0. As of March 31, 2015, the Company had 2,683,541 unvested stock options outstanding of which $3.1 million of compensation expense is expected to be recognized over the weighted average remaining vesting period of 1.2 years. The number of unvested stock options expected to vest is 2,683,541 shares, with a weighted average remaining life of 9.4 years, a weighted average exercise price of $5.01, and an intrinsic value of $26.8 million.